CAROB MARKET REPORT

As of September 13 2004

Carob Market Report. GLOBALCarob Market Report. GLOBAL(highlights)(highlights)

• We are facing a short crop campaign in most producing countries with the exception of Spain, Italy and Algeria, where volumes are rather normal.

• One of the two main producing countries Morocco, is for the first time in years, not supplying seeds at the beginning of campaign to importing countries.

• In some countries speculation deposits have been consumed up and traders are trying to acquire again some stocks in top of the normal needs of LBG producers.

• In top of this, some LBG producers have started actual campaign without significant stock volumes, when the usual level is of 3 or 4 months and no forward deals were done this year

• Due to this lack of stock building, speculators are trying to buy seeds from kibblers to take out product of the market ant try to sell later at a higher price, what increase speculation and potential risk of price increases..

• AS A SUMMARY WE CAN SAY, IS A TOUGH START OF CAMPAIGN, WHERE THE ADVICE WOULD BE TO COVER STRATEGIC CUSTOMER ORDERS AS SOON AS POSSIBLE, AS MARKET MAY BECOME EVEN TOUGHER, WHEN MAIN LBG PRODUCERS COME TO THE MARKET.

Carob Market Report. SPAINCarob Market Report. SPAIN• In Spain all regions are showing good crop volumes. Nevertheless, there is a short term poor availability of seeds due

to late rains, so Tarragona and Mallorca will start supplying middle October at the soonest and Valencia by the end of September.

• The actual coverage of local LBG producers in terms of stocks vs potential orders is considered to be rather short as compared to other campaigns, due mainly to the unexpected end of previous campaign prices and proximity of next crop reported as a good one.

• Also due to this, they are resisting to buy at high prices (2,30 eur/kg) in actual campaign, thinking situation in Morocco will be not so bad. At the same time, they continue as previous campaigns TRYING TO BUY at their respective loyal suppliers in Spain at prices ranging between 2,10 and 2,15, when availability of seeds be possible, but I am preventing them to sell to those levels by informing punctually about latest prices paid in the market, just to avoid these producers take a competitive advantage.

• The actual level of prices for small deals has been of 2,20 eur/kg (a maximum of 100 hundred tons), 2,30 eur/kg (another 3 or 400 tons) and lately 2,40 eur/kg (around 200 tons).

• What will provoke a change in the prices behavior, is when Danisco decides to buy to Armengol, that is the only way out in my opinion they have to overcome situation and face orders that will come very shortly mainly Kraft, Nutraco and Brioches Pasquier contracts, that are considered strategic customers for Danisco, when this happens will be important to know the volume, even more than price, because market is expectant about their purchasing needs.

• Another particularity of the market right now is speculator action, I have been contacted by two kibblers trying to buy first at 2,30 eur/kg and lately at 2,40 eur/kg basis, for later sales at higher price and volume was up to 200 tons.

• LOCAL STRATEGY SUGGESTED: Buy in Spain at levels of 2,30-2,40 and follow the market, as other markets are supposed to come to Spain to buy. Morocco, Portugal, Italy and Turkey, are almost blocked and Spain being the only country with availability at theoretical reasonable prices, for the time being.

Carob Market Report.MOROCCOCarob Market Report.MOROCCO• The other main producing market Morocco, is for the first time in years, not exporting seeds neither

signing long term export contracts at the beginning of campaign because of high prices, as explained before. As it is known, under these conditions market is starting with high prices of pods and later these come down if demand is normal and crop sufficient.

• At the same time, because having exhausted traders pods deposits related to several previous years, wild speculation mainly from merchants is taking place, in spite of a relatively not to bad local crop, buying pods and not selling them with fluidity and reasonable margins.

• This makes buying of pods and consequent seeds availability, almost impossible, as more price is offered less pods available will exist, so what is advised is not to try to buy and let market to calm.

• Prices for pods are reported to be in the range of 6 - 6,50 DH per kg, with yields that seem to be lower than normal, mainly in the south where traditionally were between 20 and 26%., prices for seeds do not exist at this point in time, there is no offer, and kibblers ask to wait for market slow down.

• Fewer and smaller long term contracts have been done this year, but unfortunately will not be honoured or postponed some of them, due to the big difference between expected prices and real ones, this was a very good stabilizing tool in the market, that temporarily has been lost.

• STRATEGY SUGGESTED: Follow kibbler activity to detect important movements and react accordingly, on seeds it is recommended to buy in Spain mainly where may be some availability at reasonable prices.

Carob Market Report.ITALYCarob Market Report.ITALY• Another country presenting a rather normal situation is Italy with 2500-3000 tons. Traditionally

has been high speculative market, not easily exporting seeds at market normal prices.

• Today with quick communications information is running very fast and is at all impossible isolate local good crop environments out of the rest of the market. Mainly Armengol and other people are intensively launching messages of short crops all over and this obviously has an effect on the local sellers sooner or later, even with a relatively good crop.

• Italy started with a price for seeds of 2,60 eur / kg and now it is being increased the price by at least 5% .

• So, Italy is almost blocked for releasing carob seeds even locally, also we do not have to forget that after Spain is the second importer from Morocco (more than 2000 tons in last campaign) and clearly what happens in that country takes a strong influence in this market.

• STRATEGY SUGGESTED.

Carob Market Report. PORTUGALCarob Market Report. PORTUGAL• In Portugal situation is even worse, as compared to Italy, with a crop that most of the local players

and myself confirms is of maximum 60% of normal, in spite of desperate messages of Mr Caetano declaring to everybody that crop is normal (around 4000-4500 tons).

• Prices have been set by kibblers at 2,65 eur / kg ex work as a minimum price to sell, being LBG producers announcing to pay maximum 2,50 eur / kg, the market is obviously also blocked for seeds releasing.

• Pods yield has been of low 9% instead of traditional 10-11%, thus reflecting and confirming low crop and potential low yield also in seeds.

• STRATEGY SUGGESTED: If prices for the seeds are not comparatively competitive, not to buy in this market for the time being.

Carob Market Report.TURKEYCarob Market Report.TURKEY• Turkey is also a problematic country due to the extreme cold conditions during last winter, mainly

in Antalya area where for several nights temperatures reached below - 3º C.

• In the country exists strong competition in buying pods because of the short crop, approximately 50% of a normal one, as reported by three main local kibblers, prices for pods were of 0,30 cents of euro per kg for yields below 9%.

• Under these conditions, seeds prices are expected to be high and somewhat out of competition with Spain as announced by a main local player. For the time being there is not yet product available until kibbled, this will take place hopefully not before the end of September for the very first containers.

• STRATEGY SUGGESTED: Follow the local market and detect potential opportunities when available to buy spot deals.

Carob Market Report.GREECECarob Market Report.GREECE• Greece is also announcing a short crop but here still is not possible to know prices both for the

pods and seeds.

• One of the main kibblers in the country, announced that seeds availability will take place by middle of October at the soonest.

• STRATEGY SUGGESTED : Follow this local market and be aware of potential spot deals opportunities.

Carob Market Report.ALGERIACarob Market Report.ALGERIA• Algeria is a special country dominated by one very important local kibbler. This kibbler since

many years ago is selling its whole production to Danisco.

• This year crop is better than last year, with a potential volume of around 800 tons of seeds, of which this main kibbler sold already a contract of 500 tons to Danisco at a price supposed to be around 2,20 eur / kg.

• I convinced this kibbler by the end of October when he will deeply know the volume he will avail, to offer me some containers in excess of the committed volume for export.

• I do not have information available of local price for the pods.

• STRATEGY SUGGESTED: Try to quote when these containers be offered some interesting price competing with Danisco, and in agreement with the quality of the seeds.

Carob Market Report. CYPRUSCarob Market Report. CYPRUS• Cyprus is presenting a volume of crop rather normal, around 800 tons of seeds, the market is

dominated by the 2 main cooperatives, on in the north part of the country (turkish) and the other in the grecian part.

• The quality of these seeds is the lowest both in terms of viscosity and gum yield, also has been reported lower gel strength as compared to other gums, so even for petfood production is of lower quality.

• STRATEGY SUGGESTED: Not to buy, seeds not interesting for medium / high viscosity products.

Carob Market Report. OTHERCarob Market Report. OTHER• Other countries are: Tunisia, Libano and Malta mainly, with relatively very low volume

productions.

• STRATEGY SUGGESTED: Quality in these markets is very unpredictable, I recommend not to buy in these markets.